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CRM in the Pits: The Nine Eternal Truths

29 April 2002

By Sudhir Kalé

Customer relationship management, or CRM, has become the management buzzword of the decade. Almost overnight, or so it seems, companies have devoted hundreds of billions of dollars toward purchasing and implementing CRM programs. Scores of sites on the Internet with catchy names such as www.crm.guru.com, crm-forum.com, destinationcrm.com, crmcommunity.com, and crmdaily.com have sprung up in short time, trying to capitalize on this hottest management fad.


At the heart of CRM is the reality that not all customers are equally valuable to any organization.

Is relationship marketing just the latest corporate fling or is there merit to this management philosophy? It seems that there's definitely more to the concept than newness. Qci, the relationship-marketing agency owned by Ogilvy One, has recently published research claiming that managing customers effectively can generate a 400 percent return on investment. But the same study predicts that 70 percent of the CRM projects initiated by corporations will fail because of a lack of leadership and insufficient education about how relationship marketing works. Another recent study by Deloitte Consulting shows that companies who understand customer value are 60 percent more profitable than those that do not. While CRM undoubtedly has the potential to boost a firm's profitability, it comes with a heavy price. Creating long-term relationships with customers can extremely costly. The worldwide CRM services business alone reached US$34 billion in revenues in 1999.

At the heart of CRM is the reality that not all customers are equally valuable to any organization. A company would only like to forge relationships with those customers who provide the highest lifetime value to the organization. A study that I was recently involved in suggests that in the case of casino gaming, the usual principle that 80 percent of a firm's revenue comes from 20 percent of its customers does not hold. Instead, a mere 3 percent of its customers generate approximately 90 percent of its profit! Also, the top 2.5 percent of customers generate approximately 53 percent of all table revenues.

Given these compelling statistics, it becomes axiomatic that any gaming establishment should identify its most lucrative customers and then go on to form sustainable long-lasting relationships with them. The problem plaguing the industry is not the CRM concept itself, but the implementation aspects of CRM. All too often, poorly trained shift managers, pit bosses, floor supervisors, and the dealers offend and alienate the most prized customers. In my article posted on www.urbino.net on June 14, 2001, I quoted a grievance from one such valuable customer.

". . . I have quite a few comps accumulated in my account at the casino. Yet every time I ask for a docket, the pit bosses act as though they are doing me a big favor. Sometimes, they simply forget about my request. Think of it. I play at least three days a week with two or three grand each time. I cannot remember the last time I had a win. I know it is my choice and that ultimately it is my problem. But at the very least, I expect genuine courtesy from the casino staff. They seem oblivious of the fact that if it weren't for mugs like me, they would not have a job."


The global scene is changing rapidly, and casinos will have to change as well.

Needless to say, this customer, and many like him, will provide business to the casino, albeit reluctantly, only so long as they have no say in choice of establishments. I witnessed another CRM faux pas just last week. The casino, which I frequent on a regular basis, went to considerable efforts to have ten busloads of their prime customers attend a concert by the superstar Elton John. Guests were wined and dined on the way to the concert venue and back. The casino had secured prized seats for its patrons. It was customer service at its best. Then, when the guests were brought back to the casino, a lot of customers--yours truly included--hit the blackjack tables. The very first dealer at our table, we'll call him Michael, demonstrated from the very beginning that he did not want to be at work. He had an extremely unwelcoming body language, did not greet the new arrivals, and proceeded to deal the cards with mechanical boredom. The only time Michael's eyes lit up was when all his customers lost their bank and got up from the table. Guess what? Fifteen minutes of Michael's performance undid all the positive impact created by the casino customer service staff and Elton John!

The global scene is changing rapidly, and casinos will have to change as well. Complacency and hubris in customer interactions will certainly bring on the demise of many casinos. Just the last five years have seen a period of sea change for the global gaming industry. Until about five years ago, there was no such thing as an Internet casino. Gaming on Indian reservations and riverboat gaming did not provide as fierce a competition to traditional land-based casinos. Most gambling establishments operated on the "build it and they will come" premise.

All the changes in technology, legislation and entry barriers have made the industry's future extremely tumultuous. Only those establishments that operate on a customer-centric philosophy will survive the decade. Now, more than ever, is the time for managers to truly understand their customer, and for them to echo this understanding in their customer interactions or "moments of truth."

When we talk of enhancing customer satisfaction, engendering rapport and building loyalty, we are referring mainly to what casinos call "good customers." These are the unsung heroes who ensure that casino staff, deservedly so or not, get to keep their jobs in an industry that has yet to fully realize the value of a customer-centric orientation.

With all the recent competitive pressures, the fight for good customers will intensify. Senior management will need to get serious about customer interactions. A few forward-thinking casinos have already implemented measures whereby their good customers are delighted by every encounter they have with the casino staff. Arthur Nathan, vice president-HR for the Mirage, has been quoted in Personnel Journal as saying, "We spend a great deal of time and money making the buildings very attractive, but we're also convinced that the building doesn't do a thing for us once you get people in the door. If the service is no good, the building is a waste of money. The chairman of the board, the board of directors, the presidents of our properties, all know that intuitively, and thus give [HR] a great deal of resources to make sure the staff is selected properly, is well trained, and is highly motivated."

What can supervisors, pit bosses, games managers and shift managers do to preserve their base of "good" customers? Simply keeping your customers satisfied is just not enough. You'll have to delight them in every single encounter if you want to win their loyalty. This necessarily requires inculcation of the proper attitude and concerted actions to ensure that the opportunity to retain customer loyalty is capitalized upon in every single service encounter. I have distilled the essence of CRM encounters based on my experiences in hundreds of casinos across five continents. The following "nine eternal truths" relate to excellence in customer encounters, frequently referred to as "moments of truth." They are articulated for those casino executives who want to survive and prosper in the contemporary business environment.

  1. Realize and then reiterate to yourself at every opportunity that the only reason you have a job is because customers frequent the casino. All of your operating efficiency will amount to naught if customers stop coming. Looking at the salary ranges in the service industry, casino executives appear to be truly blessed. To be perfectly frank, they make more than their education or skills dictate. Added competition will now ensure that only customer-centric managers survive, and they will have to earn every penny that they make. Once you truly internalize the fact that it is the customer who provides you with your regular paycheck, make sure that you share this 'discovery' with every member of your front-line staff.

  2. Develop appropriate respect for the money a customer puts on the table. Money is as real for customers as it is for you. When customers "lose" as they are bound to if they play long enough and often enough, they will be upset and frustrated. These feelings sometimes inevitably translate into difficult behaviors that you as casino staff have to contend with. This is as much a part of the job as making the roster, figuring out the table drop, and win/loss. You need to develop the expertise whereby such behaviors are always handled with just the right sensitivity and empathy. Furthermore, this expertise needs to permeate across every level in the organization, right down to the dealer.

  3. Every encounter with a customer is a "moment of truth." As far as a customer is concerned, you are the casino. The "you" I'm referring to could be the casino manager, shift manager, games manager, pit boss, security guard, customer services manager, or the keno runner. Good buildings and aesthetically appealing facilities are nice, but the customer's perception of a casino will ultimately be determined by how you and your the frontline staff, interact with her. Scandinavian Airlines System's Jan Carlzon explains how this works in the airlines industry. He estimated that with ten million people coming in contact with approximately five SAS employees for an average of fifteen seconds each time, the company was "created" in the minds of customers 50 million times a year. Carlzon goes on to assert that these 50 million "moments of truth" were the moments that ultimately determined whether the company would succeed or fail. Have you and all your colleagues internalized such realization? If so, do you use every possible opportunity to proselytize it to the frontline staff?

  4. Always interact with clients bearing in mind the "lifetime value" of a good customer. A 35 year-old local customer who spends two thousand a month supporting his habit is worth about a million dollars over a lifetime. Imagine what most businesses will be willing to put up with to make a million-dollar sale. It is surprising how few executives identify with the lifetime value concept. In a recent training workshop for shift managers and casino managers, only three out of 45 executives could figure out the worth of a hypothetical blackjack player when they were provided the following details: plays three times a week for about three hours, average bet $100, estimated length of relationship with the casino being seven years.

  5. Invest in making your company, your department, or your pit a place where customer-centric culture thrives. A customer-centric culture is one where the top bosses support staff that are responsive and understanding toward customers. Is your organization (or work unit) so driven by the primacy of customer experience that it defines your very soul? Do you explicitly communicate to your employees your customer-centric values? Do you authorize your subordinate staff to make customer-centric choices in their customer interactions? Empowerment is what usually distinguishes excellent service from indifferent service. Most casinos falter when it comes to understanding the true essence of "player development." It is not all about providing champagne and oysters "on the house." It is not only about free concert tickets. It is not about holding a car draw every three months. Fishing trips and golf tournaments cannot ever compensate for a customer's shoddy or indifferent treatment by frontline staff. Human relationships are complex indeed, and every service employee--whether in direct customer contact or not--should constantly strive to get better at them through right training and right attitude.

  6. Your actions scream while your words whisper. You are the role model for every employee that directly or indirectly reports to you, right down to the croupiers. Pronouncements of service orientation or "customer is king" will have little effect on the attitude of subordinates. Actions demonstrative of caring and concern for the customer have a far greater impact than pro-customer slogans devoid of action. Your subordinates at every level will treat the customer right only when they see your commitment to the customer backed by action. And once they start to do right by the customer, you will have fewer customer problems and complaints. Direction alone is not enough. It is with direction and actions that you need to underscore the importance of customer interaction. Croupiers will value your good customers only if they are convinced that you value them. You need to demonstrate to them such commitment at every opportunity.

  7. Developing a personal relationship with your good customers is vital. Once you develop a rapport with your key customers, they are more likely to open up to you and listen to you. This rapport is critical for satisfactory resolution of any conflict or grievance. Developing rapport requires training and practice, but it is definitely worth the effort. If you are unfamiliar with concepts such as personality and temperament, make sure you acquaint yourself with these rapport-building techniques. If a lot of your customers are from overseas, make sure that you understand their culture and relate to them accordingly. All that most customers will ask of you is courtesy, politeness, and responsiveness. Approach each customer with an attitude encompassing these three attributes and you'd get to keep most of them for life.

  8. Engage in on-going internal marketing. The notion of internal marketing recognizes that an organization consists of an independent chain of individuals and functional units, each taking inputs from one another and turning them out into external customer service. The basic assumption is that if everyone strives to provide the best service to these internal customers, then the end customer will automatically benefit from excellent service. A climate of internal marketing can only thrive where there is commitment to the concept at the very top. Southwest Airlines has been the undisputed pioneer in the practice of internal marketing. Acknowledged universally as the airline providing excellent customer service, Southwest insists on treating all its employees the way it wants the employees to treat their customers. The mission statement of the company makes the explicit promise, ". . . Employees will be provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Southwest customer." The mantra at Southwest is, "Customers come second. . . and still get great service."

  9. Continually train yourself and push to train your subordinates in soft skills and customer service. In today's buyers' market, training is not a luxury but a necessity. On-going training not only decreases employee turnover and increases employee loyalty, it increases per employee revenue and customer loyalty. A few years ago, Citicorp conducted a study of seventeen companies recognized for outstanding service. It found that each of these companies invested up to 2 percent of gross sales for formal, on-going service education programs. A well trained workforce is a more motivated and more productive workforce. If you are serious about serving your customers well, you need to spend a minimum of 40 hours per year training each employee in the art of customer service. Imbibing relationship skills in every employee is the best investment a company could ever make. Stephen Wynn echoes these sentiments eloquently. "We spend whatever it takes to hire and train the best and the friendliest employees possible, people who enjoy their jobs and who help us nurture that customer goodwill. Our people are the mortar that holds together the bricks; they breathe life into mere buildings."

The nine eternal truths discussed above underscore the undeniable link between the front-line and the bottom-line. Their induction in a casino's corporate philosophy and practices will ensure that CRM is practiced in the pits. Such a comprehensive hands-on approach to relationship marketing alone will guarantee the survival of many of today's casinos and casino executives.

CRM in the Pits: The Nine Eternal Truths is republished from iGamingNews.com.
 

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Sudhir Kalé
Sudhir Kalé